Milking it: making the most of tougher times in dairy

By: "Farm Tender" News
Regenerative Ag & Carbon Farming News
Jan 25, 2019
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By Neil Findlay - Agribusiness Customer Executive, National Australia Bank

Today marks the end of another excellent International Dairy Week (IDW) in Tatura, Victoria, and having spent time talking with our dairy customers at the event, I was struck by their focus on proactive business planning in the face of some persistent industry headwinds.

For many customers, milk prices, seasonal conditions and high input costs are key challenges in the short to medium term, and it’s an observation that’s only reinforced when you look at the in depth data released this week by the NAB Economics team.

NAB’s latest Dairy In Focus report shows that despite the Australian dairy export price index rising 10.2 per cent from December to January (the largest monthly gain since 2016), flow-on benefits from higher prices have been tempered by tough seasonal conditions and associated cost pressures.

Seasonal conditions across most key dairy regions were mixed to poor in 2018, and this lack of rain has been compounded by an associated lift in the cost of water entitlements and feed grain.

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The NAB feed grain price index rose 74 per cent throughout the year, and we’re seeing temporary water entitlements priced between $300 to $500 per megalitre, and even higher.

While this data paints a challenging picture for the sector, it doesn’t show the positive and proactive approach to business planning that many of our dairy customers are taking as they move into the new year.

We have customers actively considering pricing options and looking at ways to maximise returns for their milk through value adding, increased production, or negotiating more favourable arrangements with processors.

Others are planning to improve measurement of water use and feed production, clear out surplus equipment, invest in more efficient technology, or ramp up on-farm fodder production to offset high feed grain costs.

At the same time, some processors are looking for supply and investing in leading technology in their factories to benefit from growing demand for value-added milk products.

It’s encouraging to see so many actively tackling tough conditions through business planning, whether it’s by talking with advisors, workshopping scenarios or preparing action plans to deploy quickly in the event of market changes.

The importance of strong financial control and a good banking relationship can’t be overstated in tougher times, and we’re working with our dairy customers ensure that they’re making the most of the resources available to them.

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Through resources like our Agriview newsletter, which features the latest industry-specific economic updates, business trends and case studies, we’re helping customers run their businesses as best they can. I’d encourage all those who aren’t already Agriview subscribers, to subscribe here.

Over the past few days at IDW, dairy breeders have exhibited their finest cattle alongside displays of cutting edge technologies from innovative dairy companies.

To me, IDW is proof of the world-class nature of the Australian dairy sector, and with our team of bankers across all key dairy regions, we’ll be working hard to ensure that the industry remains a critical piece of the Australian agricultural landscape for generations to come.

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